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Phase Three

Budgeting & Finance

Project timeline

Budgeting is part of the Planning phase, which typically takes 1-3 months. Most ADU projects take 12-18 months to complete, but some extend to 24 months or more.

Step-by-Step

Estimate your project cost

BuDgeting & Finance Step 1

It is helpful to avoid having a fixed budget total in your head as you explore your options, because budgets are difficult to pin down this early in the process. That said, our ADU Calculator is a great place to start when developing a budget. It provides a rough estimate of costs and potential rental income and will help you understand how choices can impact your budget over time. Our Workbook and Exercises also have helpful information to get started, and our custom Feasibility Consults can help you get more specific.

The average hard cost per square foot is between $400-$700, but many decisions can dramatically increase those costs. For example, a complex roof can cost tens of thousands of dollars. The level of fit and finish, such as flooring, cabinets, and appliances, can be 30% of the total cost. Working with your architect and general contractor together on value engineering from the beginning is critical to keeping costs down.

In addition to the hard costs of construction, there will be some soft costs as you develop your design and move through the permitting process. Fees for an architect range from $5,000-$25,000 for example. You will also need an energy analysis of your project, often called a Title 24/CalGreen report ($300-700). You may need a soils report from a Geotechnical Engineer ($2,000-$6,000). In total, soft costs can range from $5,000-$30,000. Impact fees charged by the local jurisdictions have been waived for projects under 750SF, and school fees are waived for projects under 500SF but permit processing fees remain (generally under $10,000 but it depends on the jurisdiction).

Key Resources

ADU Calculator

Estimate the cost of converting part of your home or constructing a new ADU. You can even use this tool to think through the return on investment (ROI) of building an ADU.

Assess financing options

Budgeting & Finance Step 2

There are five main options available to homeowners to finance their ADU. Many homeowners use a mix of these options. As you’re doing financial planning for your ADU, remember to include the rental income you’ll receive in your calculations. Some lenders will not consider this income when evaluating you for a loan, but it’s important for you to consider it in your calculations. Our ADU Calculator tool helps you plug in financing info and calculate how long it will take for you to see a return on your investment (hint: not very long)!

Learn more about ADU financing options from our on-demand webinar, How to Finance Your ADU and our webinar The Financial Case for Building an ADU Now and Not Later.

  1. Cash savings or other liquid assets
  2. Cash-out refinance
  3. Loans from friends or family
  4. Home equity loan or home equity line of credit (HELOC)
  5. Renovation loans

For more information on financing an ADU, watch another on-demand webinar with Redwood Credit Union on their NEW ADU construction loan which opens up $300K in ADU financing for homeowners with low income &/or low equity! Plus, see CalHFA’s new $40K predevelopment grant for ADUs! And look up the local finance experts available on our Vendor Registry here. In addition, check out this comprehensive overview of ADU financing from the statewide Casita Coalition.

Related Blog posts

How to Finance Your ADU Webinar
Top 6 Tips to Reduce Your ADU Costs
The Casita Coalition’s ADU Finance Guide for Homeowners
5 Hidden ADU Costs You Should Know About
The Financial Case for Building an ADU Now & Not Later: Webinar
Webinar: Accessory Dwelling Unit Roundtable Conversation + Live Q&A
Maxable Article: Cost Differences Between a Prefab ADU and a Custom ADU
Webinar: A New Way to Finance Building Your Dream ADU!
Editable ADU Budget Template Spreadsheet
How to retire on your own terms
Generate a passive income stream with an ADU
Webinar: Ask Us Anything!
News: Napa County launches program to spur ADU construction
Webinar: Ask Us Anything! – Part 2 – Nov 2, 2023
Webinar: Paying for Your ADU – Learn from the Experts
Paying for Your ADU & Consult Special
Webinar: Explaining Napa County’s Affordable ADU Loan Program

FAQs

Find answers to the most frequently asked questions about budgeting and finance.

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